Subscriptions have become a valuable way for retailers to attract and retain customers. Put simply, subscription services have proven they can meet customer demands that retail stores alone or e-commerce-only retailers can’t match. But before diving into why these programs are valuable from both a customer and retailer perspective, it’s important to clarify the three main types of subscriptions that retailers often adopt.
Sampling isn’t a new development in beauty retail by any means, but Sephora’s PLAY! program remains the best example of a sampling subscription. Birchbox started the trend of delivering samples in 2010, but Ipsy soon eclipsed it by relying heavily on influencers and social media. Now, Sephora rules the roost by connecting product delivery of samples, full-service e-commerce, and in-store experiences. Beauty products lend themselves well to this model because they are small and quickly consumable, and there’s a huge variety of new products to try.
Curated subscriptions are especially popular in the apparel world. Currently, the ones specifically created for children are dominating, including Gap’s babyGap Outfit Box, Old Navy’s Superbox, and Target’s Cat & Jack subscription. Curated apparel subscriptions save customers time shopping for clothes by instead delivering them unique outfits that suit their style.
Rental variants, such as Rent the Runway, have been around for a few years. Other companies such as Ann Taylor, NY&C Closet, and Le Tote share the space. For retail stores, the rental subscription represents a largely untapped market. Of course, complete integration with store inventories, point-of-sale systems, and supply chain solutions make this incredibly complicated, especially with the myriad of variables from size to color to fit that go along with the apparel business.
Finally, there are subscriptions that focus on replenishment, such as Dollar Shave Club, and others, such as vitamin subscription Care/of, that focus on personalization.
But why would today’s customers choose to shop at a retailer that offers a subscription service over one that doesn’t? The answer lies in the fact that these different subscription models allow retailers to create new, long-lasting connections with customers.
What Makes Subscriptions Special?
Most subscriptions start off by enticing skeptical customers with a generous introductory offer. When those consumers try out the experience, they tend to enjoy the curated products and the convenience of delivery enough to recognize the value the subscription provides and remain members. This is especially true in the world of food delivery subscriptions such as Blue Apron. They might also be motivated to refer friends or even get a box as a gift.
The practice of gifting a subscription is relatively common, especially in the baby apparel segment. Gifting is incredibly valuable to retailers such as Gap because it introduces its products to customers who might never have shopped at the retailer. If they become fans, it’s a win for retailers, regardless of whether they maintain the subscription.
In addition, for customers who live far away from retailers or those with limited mobility, curated subscription boxes offer the opportunity to frequent stores that would otherwise be out of reach or that they would not have a relationship with. It’s clear that benefits of subscription programs extend far beyond the box.
For an example of a well-run subscription, look no further than Sephora. The beauty brand is currently leading the space when it comes to combining subscription box experiences with retail stores. In addition to sending members a monthly box, it also schedules in-store experiences during which customers receive personalized advice, information on product pairings, and passes to take a friend to the next event. Sephora also implemented a loyalty program to make its subscription even “stickier.”
While it might not be feasible for all retailers to copy Sephora’s model, it’s an excellent example that’s worth emulating when possible.
What’s Next for Subscription Programs?
In the future, subscription models will continue to grow in popularity, and different models will arise to serve different audiences. Hybrid programs combining rentals, curation, and store tryouts are likely to crop up. Store pickup and returns will be a possibility as well. The names will vary and the concepts will evolve, but the advantages subscription programs bring to retailers will remain the same.
Subscriptions ignite loyalty by providing a customer with a feeling of belonging. They feel understood, and they enjoy better deals and a relationship that’s easy for them. Retailers, in turn, earn recurring revenue as well as access to a wealth of customer data that can produce valuable insights for the company’s future growth.
Today’s customers want curation, sophisticated customer service, true value, and easy transactions. A well-designed subscription can meet all of these needs. If we open up the definition of subscriptions to include memberships, loyalty programs, curation, exclusive content, and overall customer connectivity, only retailers who conquer these areas will have a fighting chance at success moving forward. As we move from transactional selling, companies will find that subscriptions are a perfect means to enter into relationships and cement them so they last forever.
Georg Richter is founder and CEO of OceanX, which is reinventing the membership economy by transforming customer-brand interactions and providing a powerful engine for subscriptions. Georg specializes in implementing next-generation technologies and innovative technology solutions that transform commerce from transactions to relationships.